Analysis: Putting corporate cops in the banks is 20 years too late

The decision to put corporate cops inside our banks and big insurance companies is a worthy initiative, but one that’s come 20 years too late.

The Royal Commission, if it’s highlighted anything, is the weakness of the corporate regulator ASIC in the face of multi-billion dollar corporations that pledged, but failed, to do the right thing by customers.

Unlike the Securities Exchange Commission in the US, which has enormous powers of surveillance and intervention, ASIC has had vastly less resources, has taken on fewer cases and has been treated as a mere speed-bump by the biggest Australian banks and insurance companies.

Australian Securities and Investments Commission (ASIC) chair James Shipton leaving the Royal Commission into banking earlier this year. Picture: AAP (AAP)

Self-regulation has been the mantra, self-interest has been the result.

It means that ASIC is not feared by many in the corporate and finance world as the SEC is in America. And though ASIC will point to its countless banning orders of financial planners, mortgage brokers and directors, the truth is that it has plucked out the easiest of these cases.

The ACCC, by contrast, will take on extremely difficult cases because it understands the value in sending a message to big companies and small that their behaviour is being tested and monitored.

The move from ASIC will see a corporate watchdog installed in all four big banks and AMP. Picture: Getty (Getty)

As former ASIC Chairman Greg Medcraft once explained to me, ASIC became a reactive, not a proactive regulator. It chased down problems after they happened, not as they were emerging.

And, he said, the real problem was that inside big organisations as people, teams or managers considered doing the wrong thing – or putting the corporation or their personal interest ahead of the customers’ – they did not fear the intervention of the corporate cop.

The tap on the shoulder … the old "‘ullo ‘ullo, what’s going on here then?"

And it is the fear of early intervention that will change behaviour … to make people think first before taking advantage of customers; before falsifying documents; before putting personal bonuses first.

The problem is: this new approach needed 20 years of scandals, losses, emotional trauma and a Royal Commission to be arrived at.